Onto Innovation(ONTO) - 2025 Q2 - Quarterly Results

Executive Summary & Business Highlights Onto Innovation delivered a strong second quarter with revenue exceeding guidance, expanded market footprint in advanced metrology, and announced a strategic acquisition, with the CEO projecting future growth in advanced nodes and AI packaging Second Quarter Business Highlights Onto Innovation delivered a strong second quarter, exceeding revenue guidance and expanding its market footprint in advanced metrology and inspection systems, particularly for AI packaging, complemented by the strategic acquisition of synergistic product lines from Semilab - Delivered a strong second quarter, with revenue exceeding the midpoint of previously announced guidance range[6] - Expanded Dragonfly® 3Di metrology footprint, shipping tools to more than 10 customers for applications including co-packaged optics and advanced 2.5D logic packaging[6] - Achieved strong adoption of sub-surface defect inspection, shipping over 20 Dragonfly systems for advanced AI packaging applications in the quarter[6] - Announced acquisition of synergistic product lines from Semilab International Zrt. for $545 million in cash and stock, expected to add over $130 million in annual revenue and be immediately accretive to earnings per share upon closing[6] CEO Commentary CEO Michael Plisinski highlighted increasing customer value through innovative product development, projecting a near doubling of advanced node revenue in 2025, expanded 3Di metrology positions, and anticipating Q3 as a low point before Q4 AI packaging spend accelerates revenue into 2026 - Expected near doubling of revenue in 2025 in advanced nodes markets[3] - Expanded positions in Dragonfly's 3Di interconnect metrology and validated sensitivity and scan time performance in next-generation inspection Dragonfly system[3] - The pending Semilab acquisition is expected to further increase the breadth and depth of the company's portfolio[3] - Third quarter revenue is likely to represent a low watermark for the year[3] - Expects an acceleration in AI packaging spend in the fourth quarter, returning total Q4 revenue to Q1/Q2 levels with continued momentum into 2026[3] Financial Performance Overview Onto Innovation reported a 5% year-over-year revenue increase in Q2 2025 and 10% in H1 2025, with non-GAAP metrics showing robust operational performance despite some GAAP declines Three Months Ended June 28, 2025 (Q2 2025) For Q2 2025, Onto Innovation reported a 5% year-over-year revenue increase to $253.6 million, with GAAP gross margin and net income declining, while non-GAAP metrics showed improvement or stability after adjustments Q2 2025 Financial Highlights (GAAP vs. Non-GAAP) | Metric | Q2 2025 (GAAP) | Q2 2024 (GAAP) | YoY Change (GAAP) | Q2 2025 (Non-GAAP) | Q2 2024 (Non-GAAP) | YoY Change (Non-GAAP) | | :----------------------- | :------------- | :------------- | :---------------- | :----------------- | :----------------- | :-------------------- | | Revenue | $253.6M | $242.3M | +5% | $253.6M | $242.3M | +5% | | Gross Margin | 48.2% | 52.9% | -4.7 pp | 54.5% | 53.2% | +1.3 pp | | Operating Income | $32.2M | $48.8M | -34% | $65.6M | $64.5M | +1.7% | | Operating Margin | 12.7% | 20.2% | -7.5 pp | 25.9% | 26.6% | -0.7 pp | | Net Income | $33.9M | $52.9M | -35.9% | $61.3M | $65.4M | -6.3% | | Diluted EPS | $0.69 | $1.07 | -35.5% | $1.25 | $1.32 | -5.3% | Cash and Investments Onto Innovation generated $57.9 million in cash from operations for Q2 2025, ending the quarter with $895 million in cash and short-term investments - Generated cash from operations of $57.9 million for the second quarter of 2025[8] - Ended the second quarter with $895 million of cash and short-term investments on hand[8] Six Months Ended June 28, 2025 (H1 2025) For H1 2025, Onto Innovation's revenue grew 10% year-over-year to $520.2 million, with GAAP net income slightly down, but non-GAAP operating income and net income showing robust growth H1 2025 Financial Highlights (GAAP vs. Non-GAAP) | Metric | H1 2025 (GAAP) | H1 2024 (GAAP) | YoY Change (GAAP) | H1 2025 (Non-GAAP) | H1 2024 (Non-GAAP) | YoY Change (Non-GAAP) | | :----------------------- | :------------- | :------------- | :---------------- | :----------------- | :----------------- | :-------------------- | | Revenue | $520.2M | $471.2M | +10% | $520.2M | $471.2M | +10% | | Gross Margin | 51.0% | 52.3% | -1.3 pp | 54.8% | 52.7% | +2.1 pp | | Operating Income | $95.4M | $91.6M | +4.1% | $142.1M | $121.8M | +16.7% | | Operating Margin | 18.3% | 19.4% | -1.1 pp | 27.3% | 25.9% | +1.4 pp | | Net Income | $98.0M | $99.8M | -1.8% | $136.1M | $123.8M | +10% | | Diluted EPS | $1.99 | $2.01 | -1.0% | $2.77 | $2.49 | +11.2% | Financial Outlook Onto Innovation provides Q3 2025 guidance, forecasting revenue between $210 million and $225 million, with projected gross margin of 53% to 55% and diluted EPS ranges Third Quarter 2025 Guidance For Q3 2025, Onto Innovation forecasts revenue between $210 million and $225 million, with gross margin of 53% to 55%, and diluted EPS ranging from $0.52 to $0.72 (GAAP) and $0.75 to $0.95 (non-GAAP) Q3 2025 Financial Guidance | Metric | Low End | High End | | :----------------------- | :------ | :------- | | Revenue | $210M | $225M | | Gross Margin | 53% | 55% | | GAAP Diluted EPS | $0.52 | $0.72 | | Non-GAAP Diluted EPS | $0.75 | $0.95 | Non-GAAP Financial Measures This section discusses Onto Innovation's use of non-GAAP financial measures to provide a clearer view of operational performance by excluding specific non-recurring items for transparency and comparability Discussion of Non-GAAP Financial Measures Onto Innovation uses non-GAAP financial measures to clarify ongoing operational performance by excluding items like amortization of intangibles and M&A expenses, aiming for greater transparency and comparability, though not as a GAAP substitute - Non-GAAP financial measures exclude amortization of intangibles, merger and acquisition-related expenses and benefits, litigation expenses and benefits, and restructuring costs[13] - These items are excluded because they are outside normal operations, difficult to forecast, or not representative of ongoing operations[13] - Non-GAAP measures are used for analyzing business performance, making operating decisions, forecasting, and determining compensation, providing useful supplemental data for transparency and comparability[14] - Limitations include that non-GAAP measures are not prepared in accordance with GAAP, may differ from those used by other companies, and exclude items that could materially impact reported financial results[21] Corporate Information This section provides details on Onto Innovation's Q2 2025 webcast and conference call, outlines forward-looking statements and associated risks, and describes the company's leadership in process control technologies Webcast & Conference Call Details Onto Innovation hosted a conference call and live webcast on August 7, 2025, to discuss Q2 2025 financial results, with replay details available online - Conference call held on August 7, 2025, at 4:30 p.m. Eastern Time[11] - Dial-in information: (888) 394-8218 (U.S.) or +1 (646) 828-8193 (International), Conference ID 8788805[11] - Live webcast and one-year replay available at www.ontoinnovation.com[11](index=11&type=chunk)[12] Forward-Looking Statements This section contains forward-looking statements about Onto Innovation's future performance, growth, and market outlook, which are subject to various risks and uncertainties, and the company does not commit to updating them - Statements cover business momentum, future growth, technology development, product acceptance, manufacturing practices, semiconductor market outlook, and future quarterly financial outlook[22] - Risks and uncertainties include economic environments, customer capital spending fluctuations, supply chain management, political/economic/legal/regulatory changes, intellectual property protection, natural disasters, global trade issues, customer relationships, and the ability to consummate and integrate acquisitions like Semilab[22] - Onto Innovation does not assume any obligation to update the forward-looking information, except as required by law[23] About Onto Innovation Onto Innovation, headquartered in Wilmington, Massachusetts, leads in process control, offering advanced technologies to optimize yield, device performance, quality, and reliability across the semiconductor value chain - Onto Innovation is a leader in process control, combining global scale with an expanded portfolio of leading-edge technologies[24] - Offerings include unpatterned wafer quality, 3D metrology, macro defect inspection, metal interconnect composition, factory analytics, and lithography for advanced semiconductor packaging[24] - Aims to optimize customers' critical path of progress by addressing yield, device performance, quality, and reliability issues[24] Condensed Consolidated Financial Statements This section presents Onto Innovation's condensed consolidated balance sheets, statements of operations, non-GAAP financial summary, and detailed reconciliations for Q2 and H1 2025, including Q3 2025 guidance Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show Onto Innovation's financial position as of June 28, 2025, with total assets slightly increasing due to higher cash and investments, while liabilities decreased and stockholders' equity grew Condensed Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | June 28, 2025 | December 28, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash, cash equivalents and marketable securities | $894,936 | $852,328 | | Accounts receivable, net | $285,329 | $308,142 | | Inventories | $270,219 | $286,979 | | Total current assets | $1,494,406 | $1,477,522 | | Net property, plant and equipment | $132,987 | $123,868 | | Goodwill and intangibles, net | $440,603 | $457,437 | | Total assets | $2,140,266 | $2,117,091 | | Accounts payable and accrued liabilities | $87,627 | $106,236 | | Total current liabilities | $155,781 | $170,089 | | Total liabilities | $177,000 | $191,209 | | Stockholders' equity | $1,963,266 | $1,925,882 | Condensed Consolidated Statements of Operations This section presents GAAP condensed consolidated statements of operations for the three and six months ended June 28, 2025, detailing revenue, gross profit, operating expenses, and net income to provide a comprehensive view of financial performance Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Six Months Ended June 28, 2025 | Six Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $253,597 | $242,327 | $520,204 | $471,172 | | Cost of revenue | $131,475 | $114,091 | $254,849 | $224,651 | | Gross profit | $122,122 | $128,236 | $265,355 | $246,521 | | Operating expenses: | | | | | | Research and development | $35,292 | $27,044 | $63,322 | $53,599 | | Sales and marketing | $14,910 | $18,921 | $34,626 | $37,184 | | General and administrative | $25,003 | $19,705 | $47,788 | $37,065 | | Amortization | $8,446 | $13,112 | $16,891 | $26,224 | | Restructuring and other | $6,224 | $621 | $7,347 | $879 | | Total operating expenses | $89,875 | $79,403 | $169,974 | $154,951 | | Operating income | $32,247 | $48,833 | $95,381 | $91,570 | | Interest income, net | $8,631 | $8,496 | $17,897 | $15,857 | | Other (expense) income, net | $(1,137) | $(60) | $(1,880) | $734 | | Income before provision for income taxes | $39,741 | $57,269 | $111,398 | $108,161 | | Provision for income taxes | $5,830 | $4,320 | $13,392 | $8,359 | | Net income | $33,911 | $52,949 | $98,006 | $99,802 | | Earnings per share: | | | | | | Basic | $0.69 | $1.07 | $2.00 | $2.02 | | Diluted | $0.69 | $1.07 | $1.99 | $2.01 | | Weighted average shares outstanding: | | | | | | Basic | 48,925 | 49,342 | 49,053 | 49,286 | | Diluted | 49,016 | 49,674 | 49,213 | 49,656 | Non-GAAP Financial Summary This section summarizes Onto Innovation's non-GAAP financial results for the three and six months ended June 28, 2025, highlighting key adjusted metrics like gross profit, operating income, and diluted EPS for an alternative performance view Non-GAAP Financial Summary (in thousands, except percentage and per share amounts) | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Six Months Ended June 28, 2025 | Six Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $253,597 | $242,327 | $520,204 | $471,172 | | Gross profit | $138,313 | $128,974 | $285,181 | $248,082 | | Gross margin as percentage of revenue | 54.5% | 53.2% | 54.8% | 52.7% | | Operating expenses | $72,698 | $64,444 | $143,071 | $126,253 | | Operating income | $65,615 | $64,530 | $142,110 | $121,829 | | Operating margin as a percentage of revenue | 25.9% | 26.6% | 27.3% | 25.9% | | Net income | $61,303 | $65,354 | $136,112 | $123,806 | | Diluted earnings per share | $1.25 | $1.32 | $2.77 | $2.49 | Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations between U.S. GAAP and non-GAAP financial measures for gross profit, operating income, net income, and diluted EPS, including adjustments for Q3 2025 guidance Gross Profit, Operating Expenses, Operating Income Reconciliation This sub-section reconciles U.S. GAAP to non-GAAP gross profit, operating expenses, operating income, gross margin, and operating margin for the three and six months ended June 28, 2025 Reconciliation of U.S. GAAP Gross Profit, Operating Expenses, Operating Income, Gross Margin And Operating Margin To Non-GAAP (in thousands, except percentages) | Metric | June 28, 2025 (GAAP) | June 28, 2025 (Non-GAAP) | June 29, 2024 (GAAP) | June 29, 2024 (Non-GAAP) | | :-------------------------------- | :------------------- | :----------------------- | :------------------- | :----------------------- | | Three Months Ended: | | | | | | U.S. GAAP gross profit | $122,122 | $138,313 | $128,236 | $128,974 | | Non-GAAP gross profit | | $138,313 | | $128,974 | | U.S. GAAP gross margin as a percentage of revenue | 48.2% | 54.5% | 52.9% | 53.2% | | U.S. GAAP operating income | $32,247 | $65,615 | $48,833 | $64,530 | | Non-GAAP operating income | | $65,615 | | $64,530 | | U.S. GAAP operating margin as a percentage of revenue | 12.7% | 25.9% | 20.2% | 26.6% | | Six Months Ended: | | | | | | U.S. GAAP gross profit | $265,355 | $285,181 | $246,521 | $248,082 | | Non-GAAP gross profit | | $285,181 | | $248,082 | | U.S. GAAP gross margin as a percentage of revenue | 51.0% | 54.8% | 52.3% | 52.7% | | U.S. GAAP operating income | $95,381 | $142,110 | $91,570 | $121,829 | | Non-GAAP operating income | | $142,110 | | $121,829 | | U.S. GAAP operating margin as a percentage of revenue | 18.3% | 27.3% | 19.4% | 25.9% | Net Income and EPS Reconciliation This sub-section reconciles U.S. GAAP to non-GAAP net income and diluted earnings per share for the three and six months ended June 28, 2025 Reconciliation of U.S. GAAP Net Income To Non-GAAP Net Income And Non-GAAP Net Income Per Diluted Share (in thousands, except share and per share data) | Metric | June 28, 2025 (GAAP) | June 28, 2025 (Non-GAAP) | June 29, 2024 (GAAP) | June 29, 2024 (Non-GAAP) | | :-------------------------------- | :------------------- | :----------------------- | :------------------- | :----------------------- | | Three Months Ended: | | | | | | U.S. GAAP net income | $33,911 | $61,303 | $52,949 | $65,354 | | Non-GAAP net income | | $61,303 | | $65,354 | | Non-GAAP diluted earnings per share | $0.69 | $1.25 | $1.07 | $1.32 | | Six Months Ended: | | | | | | U.S. GAAP net income | $98,006 | $136,112 | $99,802 | $123,806 | | Non-GAAP net income | | $136,112 | | $123,806 | | Non-GAAP diluted earnings per share | $1.99 | $2.77 | $2.01 | $2.49 | Third Quarter 2025 Guidance Reconciliation This sub-section provides a reconciliation of Onto Innovation's U.S. GAAP to non-GAAP guidance for the third quarter of 2025 Supplemental Information - Reconciliation of Third Quarter 2025 U.S. GAAP To Non-GAAP Guidance ($ in millions, except percentages and per share data) | Metric | Low End GAAP | Low End Non-GAAP | High End GAAP | High End Non-GAAP | | :-------------------------------- | :----------- | :--------------- | :------------ | :---------------- | | Estimated U.S. GAAP Operating Income | $22.60 | | $33.90 | | | Estimated non-GAAP Operating Income | | $36.80 | | $48.10 | | Estimated U.S. GAAP Operating Margin | 11% | | 15% | | | Estimated non-GAAP Operating Margin | | 18% | | 21% | | Estimated U.S. GAAP EPS | $0.52 | | $0.72 | | | Estimated non-GAAP EPS | | $0.75 | | $0.95 |